The Confusing Information Colleges Provide Students About Financial Aid

By Adam Harris
on June 6, 2018

The cost of college is one of the main things students consider when deciding whether and where to enroll. So it makes sense that students, once admitted, would rely so much on the letters from colleges that tell them how much the institution can chip in. The problem is: Those letters, called financial-aid award letters, are often confusing and vary wildly from college to college.

A new report from uAspire, a college-affordability advocacy organization, and New America, a left-leaning think tank, examined more than 11,000 of such letters from uAspire’s work with students. What they found was inconsistency. Several of the letters didn’t even use the word “loan” when referring to an unsubsidized loan, a type of loan that accrues interest while students are in school. Other letters did not include information about how much it actually costs to go to the institution, which is vital context for students trying to figure out, for instance, how far a Pell grant (a federal grant for low-income students) will go. And half of the letters did not explain what a student had to do to accept or decline the aid that was offered.

To be sure, “aid” is a fickle word, and can mean different things under different circumstances. Grants are money that does not have to be paid back, whereas loans do, and on top of that there’s work-study, another term that is not self-explanatory, and which some letters don’t explain. And if that still does not cover the costs—the report found that Pell-grant recipients typically were left to pay an average of $12,000 in unpaid costs, that they may or may not be able to cover with subsidized or unsubsidized loans on their own—if not, parents can take out a PLUS loan (a federal loan for graduate students, professional students, and parents of dependent undergraduate students that covers the cost of attendance minus other aid) to cover the remaining balance. If that seems complicated, that’s because it is.

Going to college can be a huge financial burden. And ambiguity in explaining how to pay for it can have devastating consequences. That’s why it’s important for financial-aid award letters to clearly explain to students what they’re getting, how they’re getting it, and what financial obligations remain. If colleges are not transparent in describing how they can help students pay for their degree—for instance, the amount of money that is paid out in grants versus loans—then the likelihood that someone makes a bad financial decision increases.

Why aren’t colleges sending out more comprehensible letters? Maybe they are not thinking about the letters from a student’s standpoint, Rachel Fishman, a researcher at New America, told me. “The primary thing” colleges can be doing to fix how they explain costs to students that have been accepted, she said, “is to make sure that the letters are student-focused and that you’re not looking at them with the eyes of a financial aid officer.”

Perhaps the more likely explanation for the confusion is that the federal government hasn’t established any universal guidelines or requirements for the letters. Indeed, there are a few ways that the letters could be standardized. Colleges could voluntarily adopt the standard letter that the United States Department of Education has been recommending since 2012, which clearly explains how the full financial package is put together, but making that mandatory would require Congress to pass a law. Speaking of which, Congress could implement such a fix when it updates the federal law governing higher education, known as the Higher Education Act, which is overdue for an update, and require transparency—an approach whose success appears unlikely any time soon, as fundamental disagreements between Democrats and Republicans have derailed efforts to update the law so far this year. There was also a standalone bipartisan proposal last year to standardize the letters, but it is unlikely to pass with the Higher Education Act’s renewal still looming.

Fishman notes that fixing the award letters will not solve college costs—that needs to be dealt with separately—but it would go a long way toward helping students understand what they’re getting into when they decide to attend college.